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Global Restructuring Comes to Portugal: The “Good Pupil” and the Eurozone Crisis

Recently, I presented at a workshop at Roskilde University (Denmark) titled ‘Structural Adjustment Comes to Europe’ (14-15 November). One of the primary aims of the workshop was to discuss whether the concept of ‘structural adjustment’ was a suitable analytical lens to understand the changes occurring to Europe’s political economy, especially in relation to the Eurozone crisis. If developed, it was argued, it may provide a concept to relate the experience of states in the ‘Global South’, which had experienced similar structural adjustment programmes (SAPs) under the guise of the International Monetary Fund and the World Bank, primarily during the 1980s, to states such as Greece, Portugal and Ireland in Europe. In this post, I will analyse Portugal’s experience to demonstrate that the term ‘global restructuring’, understood as the transnationalisation of production and finance, is more efficacious in understanding and explaining the processes unfolding, and that SAPs continue to provide an important political economic tool in which to bring this to, in this case, Portugal.

How has Portugal’s national model of capitalism changed during the crisis? To understand this, industrial relations, corporate governance and the role of the state must be analysed. In relation to industrial relations it is important to note that the bailout documents state very clearly that adjustment by labour is central to restoring competitiveness to Portugal, and in turn, will assist the European Union to compete more effectively in the global economy. Due to this, there has been a decentralisation of collective bargaining, with agreements over pay and conditions moving from the state to the firm level. This has assisted in moderating wages as the strength of labour’s position vis-à-vis capital is weakened. This has only been exasperated by the growing number of unemployed, especially amongst the young, and through mass public-sector redundancies, who begin to accept ever more precarious employment ‘opportunities’.

In terms of corporate governance, due to the relatively short-period of time, the relationship between firms has not demonstrated any major change. There is still a prevalence of small and medium sized enterprises, generally with a low-technology mix, historically the case for a number of decades. However, with traditional bank lending drying up, and the conditions present in the bailout package, there is a strong emphasis on increasing the financialisation of the Portuguese political economy. Whether this can be achieved is for history to tell, but the contradiction of decreased liquidity through banks, and the shutting out of financial markets does not make for strong prospects for the national economy.

In relation to the Portuguese state’s changing role in society, it is moving from its more traditional ‘pervasive’ role in the political economy, toward becoming an ‘enabling’ state which allows market forces to flourish. This is not to say that we are witnessing ‘the retreat of the state’, but to highlight the vital role it plays in structuring and restructuring capitalist social relations. The privatisation programme is evidence of this, as public utilities and services, energy and travel companies, are sold off in the name of competitiveness and efficiency, allowing market forces to play a more dominant role in societal organisation.

However, we cannot simply understand the changes occurring in a ‘transmission-belt’ manner, where national-states are the passive recipients of these restructuring processes through bailout programmes designed by supra-/inter-national forces. Nor, simply is it sufficient to analyse national social relations and institutions as purely endogenous. Instead, it is important to demonstrate how actors’ interests, both before and throughout the crisis, are oriented in a manner which produces a relationship across scales, which in this case, includes the international and transnational. This will demonstrate therefore how Europe’s political economy, and Portugal’s within this, is mutually constituted across and beyond a number of jurisdictions.

It is no accident therefore that Portugal has been deemed “The Good Pupil” of the bailed-out states by the supra-/inter-national bodies which oversee the SAPs. The government has continually, and on a number of occasions successfully, attempted to go beyond the conditions required, highlighting how a focus on competitiveness, primarily through labour market restructuring in favour of capital is the only game in town. This highlights the mutual reciprocation that is required in interest formation to ensure that the conditions are implemented. This process supranationally is, in turn, reinforced by the ‘New European Economic Governance’ framework which, strengthens the disciplinary ‘Stability and Growth Pact’; highlights the continued role of the state through the legislative/constitutionally enacted structural deficit, restricted to 0.5% of GDP; and the heightened surveillance emanating from the ‘European Semester’.

Finally, it is evident that Portugal is witnessing a greater transnationalisation of its production structure. The inward flows of foreign direct investment (FDI) during the period of 2005-2007, the pre-financial crisis average, amounted close to $6 billion, before falling to $2.7 billion and $2.6 billion in 2009 and 2010, respectively. However, in the year in which Portugal’s bailout programme was initiated, 2011, the inflow of FDI rises to $11.1 billion, before falling slightly to $8.9 billion in 2012. Demonstrating the increased structural dependency Portugal’s political economy now has on transnational capital flows for economic performance, the pre-crisis average for the period of 2005-2007 for gross fixed capital formation (GCFC) was 12.7 per cent, whilst in 2011 this more than doubles to 25.8 per cent, increasing further in 2012, despite lower flow volumes, to 26.1 per cent. The structural adjustment that Portugal’s political economy has therefore undergone has opened space for transnationally-oriented capital to increase its importance.

Coming full circle then, it seems far more appropriate to speak of Portugal’s experience throughout the Eurozone crisis as one of ‘global restructuring’ enacted via ‘structural adjustment’. To simply focus on the latter would mean that we inadequately compare experiences externally to one another, and fall into a methodologically nationalist lens. This would negate the ability to develop an understanding, and be able to explain why these structural changes within national-states are related to one another in a mutually constitutive manner within the global political economy, whether they have experienced a structural adjustment programme or not. This is not only importantly analytically, but also politically. To demonstrate the transnationalisation of capitalist social relations, in turn, highlights the need to organise politically on a transnational basis. This is no mean feat, but for those resisting the austerity and restructuring in Portugal and wider, it may be important to begin to redress the balance which has skewed further out of their favour in recent years.

Jamie Jordan is a first year ESRC PhD Candidate, studying in the School of Politics and International Relations, University of Nottingham. An extended version of this post can be found on his academia.edu page. He is also a Board Member of the Critical Political Economy Research Network (CPERN), affiliated to the European Sociological Association, which promotes critical scholarship on capitalism and capitalist societies across a range of disciplines. Jamie can be contacted via his university email or on twitter @jamiejordan23. Comments or questions are welcome.

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